1989 (11) TMI 301 - HC - VAT and Sales Tax

Summary

Issues Involved
1. Levy of purchase tax on dry fish under Section 6 of the Karnataka Sales Tax Act.
2. Clarification and circulars issued by the Commissioner of Commercial Taxes.
3. Interpretation of entry 6-A of the Fifth Schedule under Section 8 of the Act.
4. Validity of the proposition notice issued under Section 12-A of the Act.

Detailed Analysis

1. Levy of Purchase Tax on Dry Fish under Section 6 of the Karnataka Sales Tax Act
The petitioners, engaged in the manufacture and sale of poultry feed, purchased dry fish from both registered and unregistered dealers. The assessing authority initially exempted the purchase turnover of dry fish from purchase tax under Section 6, citing that fish is exempt under Section 8 of the Act. However, a subsequent notice issued by the Assistant Commissioner of Commercial Taxes proposed to levy purchase tax on the dry fish turnover, based on the Commissioner's clarification that dry fish used in poultry feed is taxable. The court held that the purchase tax under Section 6 is applicable only to taxable goods, and since fish is exempt under Section 8, the proposal to levy purchase tax on dry fish was deemed illegal and without authority of law.

2. Clarification and Circulars Issued by the Commissioner of Commercial Taxes
The Commissioner issued two circulars stating that only edible fish is exempt from tax, and non-edible dry fish used in poultry feed is taxable under Section 5(1). The court examined whether these clarifications were consistent with the legislative intent of exempting "fish" from tax under the Act. It was determined that the Commissioner's circulars, which attempted to classify fish into edible and non-edible for tax purposes, were beyond his authority. The power to exempt goods from tax lies solely with the legislature, and the Commissioner cannot alter the statutory meaning of "fish" as provided in the Fifth Schedule.

3. Interpretation of Entry 6-A of the Fifth Schedule under Section 8 of the Act
Entry 6-A of the Fifth Schedule exempts "fish (excluding shrimps, prawns, and lobsters) except when sold in sealed containers" from tax. The court emphasized that the term "fish" should be interpreted in its plain and general sense, inclusive of all types of fish, whether fresh or dry, edible or non-edible. The legislature did not intend to make distinctions within the category of fish for tax purposes. Therefore, any attempt to classify fish based on its use or edibility for tax purposes would amount to unauthorized legislation, which is the exclusive domain of the legislature.

4. Validity of the Proposition Notice Issued under Section 12-A of the Act
The proposition notice issued under Section 12-A was based on the Commissioner's circulars, which were found to be without competence. The court held that the assessing authority's initial decision to exempt the purchase turnover of dry fish was correct, as it aligned with Section 8 of the Act. The reasons given in the proposition notice for levying purchase tax were invalid, and the notice was quashed. The court reiterated that the exemption under Section 8 should be applied as stated, without additional classifications or interpretations by the Commissioner.

Conclusion
The court allowed the writ petitions, quashing the proposition notices issued under Section 12-A and declaring the Commissioner's circulars void. The initial exemption of dry fish from purchase tax by the assessing authority was upheld, affirming that the legislative intent was to exempt all types of fish from tax under Section 8 of the Karnataka Sales Tax Act.